Origin a big fan of wind

THE AUSTRALIAN - AAP - September 03, 2007

Link: http://www.theaustralian.news.com.au/story/0,25197,22350315-5005200,00.html

ORIGIN Energy is considering buying wind farms, saying a shift to renewable energy sources could potentially push electricity bills up 20 per cent.

Chief executive Grant King said on ABC television's Inside Business that the energy retailer would consider bidding for wind farms the Queensland Government was selling.

At present, Origin offers wind and solar products to customers but has to buy the energy from other suppliers.

Wind farms are generally much more highly geared than Origin's balance sheet, Mr King said.

"So whether we put them on our balance sheet or let them sit on someone else's is a capital structure issue and an efficiency of capital issue," he said.

The federal Government plans to launch a carbon trading scheme in 2011 and is expected to set an emissions target and carbon price sometime next year.

Mr King agreed that a carbon price of $20 to $30 a tonne would make coal expensive enough to trigger a shift to natural gas, but for a shift to renewables a carbon price of $50 to $60 would be needed, and that would imply a big price increase for customers.

"Off the top of my head ... you're talking perhaps around a 20 per cent increase in prices at a consumer level," Mr King said.

Whether or not such a high carbon price was needed would not be known until the Government set an emissions-reduction target, he said.

And he warned that the Government risked making the pricing situation worse if it took too long to set a target.

"It's always important to remember that every question about the price of carbon needs to also have answered: 'What is the target, what are we shooting for'," he said.

"The deeper the cut, the greater the cost. And the clear economic consequence to that is to move sooner, because the sooner we move, the less deep we have to make future cuts."

Some prominent business leaders, including head of Origin's biggest rival AGL Energy, have criticised the federal Government for waiting until at least next year to set a carbon-trading price.

Mr King does not think Australia should aim to get all its energy from renewable sources, but should use a combination of coal, natural gas, renewables and nuclear.